The expectation that Asia will become the dominant economic region on earth in the coming decades has continued to attract investors looking to increase their portfolio’s yield and capital appreciation.
As one of the few regions in the world trading on market multiples that are at a discount to its historic average and also offering an earnings profile over the next couple of years comparable to that of developed markets, Asia is poised to offer some attractive opportunities over the next few years, according to Guinness Atkinson Asset Management.
Asian consumer price inflation remains considerably more benign than that of other segments of the market; inflation rates vary across the region, with China at 1.5% to India at 5.9%, as of February.
Asia is home to one-third of the world’s population and close to one billion of its residents have been lifted out of poverty in the past decade due to globalization and mass industrialization. According to the McKinsey Global Institute, China is expected to have 221 cities with more than one million inhabitants by 2025. That same year, the urban economy is expected to generate over 90% of China’s GDP.
The explosive growth throughout Asia, particularly in China, is an engine for the global economy. Asian industry has boosted demand for natural resources, energy, commodities, and industrial materials. The growing middle class has buoyed demand for just about everything else that comes with a better lifestyle, from appliances, cell phones, and designer clothes to cars, subways, and airplanes, according to Guinness Atkinson Asset Management.
The SmartETFs Asia Pacific Dividend Builder ETF (ADIV) offers exposure to high quality companies in China, Taiwan, Hong Kong, Australia, and other Asia Pacific countries, according to ETF Database.
ADIV tilts more toward smaller, deeper value companies than its average peer in the Pacific/Asia ex-Japan Stk Morningstar Category. ADIV selects high quality stocks, which can improve downside risk protection due to holding consistently profitable, growing companies with solid balance sheets, according to Morningstar.
SmartETFs holds a set number of positions in each of its portfolios, typically 30 or 35 holdings, and each fund follows an equal-weight approach, which helps to manage stock-specific risk.
As stocks move up and down relative to each other, the weightings change slightly, and the fund will re-balance as circumstances dictate. The firm, however, does not re-balance excessively in order to reduce transaction costs and keep the turnover low, which is a benefit for investors.
SmartETFs has a strong investment culture as a firm. Looking at the durability of the firm’s product roster, 100% of SmartETFs products have both survived and beaten their respective category median over the past 10 years, as denoted by the firm’s 10-year success ratio, according to Morningstar.
“A high success ratio not only indicates good performance but also provides insight on a firm’s discipline around investment strategy and product development. It’s encouraging to see SmartETFs showcase strong risk-adjusted performance, across its entire product lineup, with an average 10-year Morningstar Rating of 4.0 stars,” Morningstar wrote.
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